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WEB Webis Holdings Plc

1.25
0.00 (0.00%)
13 Jun 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Webis Holdings Plc LSE:WEB London Ordinary Share GB0004126271 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  0.00 0.00% 1.25 1.20 1.30 1.25 1.25 1.25 0.00 08:00:12
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Cmp Processing,data Prep Svc 50.02M -745k -0.0019 -6.58 4.92M

Webis Holdings PLC Annual Report and Notice of AGM (2401V)

30/11/2023 12:00pm

UK Regulatory


Webis (LSE:WEB)
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TIDMWEB

RNS Number : 2401V

Webis Holdings PLC

30 November 2023

For immediate release 30 November 2023

Webis Holdings plc

("Webis" or "the Group")

Annual Report and Financial Statements for the year ended 31 May 2023

Notice of Annual General Meeting

Webis Holdings plc, the global gaming group, today announces its audited results and the publication of its 2023 Report and Accounts ("Accounts") for the year ended 31 May 2023, extracts from which are set out below.

The Accounts are being posted to shareholders today together with the Notice of Annual General Meeting, and will be available on the Group's website www.webisholdingsplc.com and at the Group's Registered Office: Viking House, Nelson Street, Douglas, Isle of Man IM1 2AH.

The AGM will be held at The Claremont Hotel, 18/19 Loch Promenade, Douglas, Isle of Man, at 10.00 a.m. on 30 January 2024.

Chairperson's Statement

Introduction

As previously reported in the 2022/23 interim report, released on 24 February 2023, it has been a difficult year of trading for our principal subsidiary, WatchandWager.com LLC in the USA. Despite that, we remain confident of the way the business is taking shape, and our strategy for the future. I comment more on the financial results and our plans and aims for the business below.

Funding Update

As per the RNS dated 15th September 2023, a convertible loan note, providing new funding of GBP 750,000, was agreed, and signed with Galloway Limited (a related party), with the option for this to be converted into shares in the Company. The Board consider this to be beneficial to the Company.

Strategy

The strategy behind the investment from our main shareholder is to support our B2C sector, which as reported below has been performing well. We can see growth opportunities in this sector. Increased investment and an upturn in performance can only benefit our market capitalisation for the benefit of all shareholders.

The plan for the investment is to focus spend on software improvements and marketing of our core website www.watchandwager.com and the mobile product. At time of writing, we plan to roll out the software work in the first two months of the calendar year. We then aim to roll out our B2C marketing campaign starting in March 2024. The marketing will be primarily focused on social media activity and will focus on key US states and wagering products that derive the highest margin for us. We will be setting key performance indicators for the implementation team and will ensure the programs are very agile. We will keep shareholders informed as to progress.

Following the planned enhancements to our on-line offering, we believe that the opportunity to collaborate with those established sportsbook operators who lack a content rich and stable ADW platform will increase, and this will be one area which we will actively pursue during 2024.

Year End Results Review

The Group amounts wagered for the year ended 31 May 2023 were US$ 113.4 million (2022: US$ 120.1 million). Gross Profit reported was US $ 4.6 million (2022: US$ 5.1 million).

Operating costs were slightly reduced from last year at US$ 5.5 million (2022: US$ 5.6 million), primarily from a reduced number of race days at Cal Expo racetrack, due to severe weather conditions at the racetrack and its surrounding areas.

This resulted in a loss on the year of US$ 0.745 million, a downturn on the 2022 loss of US$ 0.374 million.

Shareholder equity stands at US$ 0.6 million (2022: US$ 1.3 million). Total cash stands at US$ 3.3 million (2022: US$ 4.1

million), which includes ring-fenced funds held as protection against our player liability as required under USA and Isle of Man gambling legislation.

Approach to Risk and Corporate Governance

As part of the adoption of the Quoted Companies Alliance Corporate Governance code in 2018, the Board completed an assessment of the risks inherent in the business and defined and adopted a statement of risk appetite, being the amount and type of risk, it is prepared to seek, accept, or tolerate in pursuit of value. This being: -

"The Group's general risk appetite is a moderate, balanced one that allows it to maintain appropriate growth, profitability and scalability, whilst ensuring full regulatory compliance."

The Group's primary risk drivers include: -

Strategic

Reputational

Credit

Operational

Market

Liquidity, Capital, and Funding

Regulatory and Compliance

Conduct

Our risk appetite is classified under an "impact" matrix defined as Zero, Low, Medium, and High. Appropriate steps are implemented to ensure the prudential control monitoring of risks to the Group and the Audit, Risk and Compliance Committee oversees this essential requirement. Further details of the Corporate Governance Statement will be found on pages 10 to 13 of this report and should be read in conjunction with my report.

The Board refined the Group's business plan which incorporates the risk and compliance framework.

Performance by Sector

WatchandWager

Business-to-Consumer

www.watchandwager.com /mobile

We have been pleased with the performance in this sector which is wagering through our main website and mobile product over the financial year. The product has held up well against extreme competition from all the big players in the market. We are very confident of the scalability of our software, as per our strategy.

We have effectively "pivoted" the business in the past two years, for this sector to contribute 70% of our revenues, with B2B only 30% (excluding our retail operations at Cal Expo). We consider this to be a healthier business mix, when previously we were vulnerable to the volatile B2B market.

Business-to-Consumer

As stated, whilst some of the software improvements have already commenced, we are in advanced planning for the main activity programme to start early in the New Year. It is very important that we achieve our targets in this sector, to not only achieve profitability, but also make the Company more attractive in merger or acquisition opportunities.

Business-to-Business

As previously stated in February, we see this sector as a very mature market, where the bigger are getting bigger and margins are tightening. Simply put, the profits from the costs of sales against the margin derived are decreasing. That said, we will continue to service our key clients to the best of our ability, and we have seen steady levels of performance from those clients. We will continue to service this sector and maximise revenue as best as possible but only with a strict attention to regulatory compliance.

Cal Expo

It has been a difficult season at our racetrack at Cal Expo Sacramento, primarily due to unprecedented weather conditions. This resulted in us losing seven race meetings due to Health and Safety concerns. This had a negative impact on financial performance as our operating costs increased as we tried to maintain track conditions whilst at the same time, we were not receiving any direct wagering income. That said, we managed the situation well with no Health and Safety issues. We remain confident for the new season, which started 17 November and will run until 3 May 2024, with 47 live race meets planned.

Key risk factors

During the period we have updated our Risk Assessment procedures and will continue to do so. The Board conducts regular risk assessments on a micro and macro level.

Licenses

During the period reported, all our licenses have been renewed successfully in the Isle of Man and the USA. We consider our licensed presence in all jurisdictions to be a key asset to the Company and we fully expect all our license renewals subsequent to the period to be approved before the calendar year end 2023.

Content

WatchandWager continues to offer the widest range of content to its global customers of any licensed advance deposit wagering Company in the world. As well as our licenses, we consider this offering to be a key unique selling proposition for the Company. All of our content agreements both domestic USA and international are up to date into 2024, and, in a number of cases, beyond.

Compliance

There were no compliance issues across the entire operation during the period reported.

Health & Safety

There were no Health and Safety issues across the entire operation during the period reported.

Outlook

We are more satisfied by the performance of our main subsidiary in the new financial year. Our performance has been stronger on key USA and global international racetracks. Our handle has also been strong on the UK content, and particularly the World Pool initiative hosted by the Hong Kong Jockey Club and the UK Tote. We look to increase that level of activity in the next year.

Board Appointments

Following the extremely sad news of the death of Sir James Mellon in July of this year, we are actively seeking to recruit additional Directors to the Board. Sir James brought a rigorous commitment to all aspect of the business and his absence is sorely missed.

Other Developments

As reported, we are still working on the Arizona Downs project, namely, to run a racing operation at the track with a similar model to Cal Expo. This has been difficult due to the lack of progress with the Landlord and the Regulatory Commission, largely out of our control. If these issues are not resolved by the end of the calendar year 2023, we will most probably abandon the project. This will have very little impact on our operating costs.

USA Expanded Gaming

Shareholders will have noted the failure of two draft Californian sports betting bills in November 2022. As previously stated, these were extremely poorly constructed draft legislation, in fact the failure of both bills to pass is of benefit to the Company. We continue to possess key licensed assets in California, both land-based at Cal Expo and with our ADW license.

Acquisitions and Mergers

The announcement of the financial support of our principal shareholder is important to the Company. This combined with our license assets, makes us a very attractive partner in all potential partnerships, mergers, and acquisitions within the USA. We will keep shareholders fully informed of any meaningful developments in this area as soon as possible.

Summary

Finally, I would like to thank all our shareholders and customers for their continued loyalty. In addition, I would like to thank all our staff and team for their work and commitment over the year.

Denham Eke

Non-executive Chairperson

29 November 2023

For further information:

   Webis Holdings plc                            Tel:         01624 639396 

Denham Eke

   Beaumont Cornish Limited             Tel:         020 7628 3396 

Roland Cornish/James Biddle

Consolidated Statement of Comprehensive Income

For the year ended 31 May 2023

 
 
                                                                 2023       2022 
                                                      Note     US$000     US$000 
---------------------------------------------------  -----  ---------  --------- 
Amounts wagered                                               113,371    120,140 
---------------------------------------------------  -----  ---------  --------- 
 
Revenue                                                1.2     50,020     53,612 
Cost of sales                                          1.2   (45,303)   (48,462) 
Betting duty paid                                               (100)      (101) 
---------------------------------------------------  -----  ---------  --------- 
Gross profit                                                    4,617      5,049 
---------------------------------------------------  -----  ---------  --------- 
Operating costs                                               (5,488)    (5,604) 
Loss allowance on trade receivables                     21        (2)         11 
Other gains                                                        34         20 
Government grant                                        15          -       (48) 
Other income                                                      247        324 
Operating loss                                           3      (592)      (248) 
---------------------------------------------------  -----  ---------  --------- 
Finance costs                                            4      (153)      (126) 
---------------------------------------------------  -----  ---------  --------- 
Loss before income tax                                          (745)      (374) 
---------------------------------------------------  -----  ---------  --------- 
Income tax expense                                       6          -          - 
---------------------------------------------------  -----  ---------  --------- 
Loss for the year                                               (745)      (374) 
---------------------------------------------------  -----  ---------  --------- 
Total comprehensive loss for the year                           (745)      (374) 
---------------------------------------------------  -----  ---------  --------- 
Basic earnings per share for loss attributable to 
 the equity holders of the Company during the year 
 (cents)                                                 7     (0.19)     (0.10) 
---------------------------------------------------  -----  ---------  --------- 
Diluted earnings per share for loss attributable 
 to the equity holders of the Company during the 
 year (cents)                                            7     (0.18)     (0.09) 
---------------------------------------------------  -----  ---------  --------- 
 

Statements of Financial Position

As at 31 May 2023

 
 
                                        31.05.23   31.05.23     31.05.22   31.05.22 
                                           Group    Company        Group    Company 
                                 Note     US$000     US$000       US$000     US$000 
------------------------------  -----  ---------  ---------  -----------  --------- 
Non-current assets 
Intangible assets                   8         19          -           11          - 
Property, equipment, and 
 motor vehicles                     9        661          1          724          3 
Investments                        10          -          3            -          3 
Bonds and deposits                 11        100          -          100          - 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total non-current assets                     780          4          835          6 
------------------------------  -----  ---------  ---------  -----------  --------- 
Current assets 
Bonds and deposits                 11        883          -          883          - 
Cash, cash equivalents and 
 restricted cash                   12      3,285      1,227        4,139      1,266 
Trade and other receivables        13      1,378        745        1,190        821 
Total current assets                       5,546      1,972        6,212      2,087 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total assets                               6,326      1,976        7,047      2,093 
------------------------------  -----  ---------  ---------  -----------  --------- 
 
  Equity 
Called up share capital            17      6,334      6,334        6,334      6,334 
Share option reserve               17         42         42           42         42 
Retained losses                          (5,803)    (5,828)      (5,058)    (5,711) 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total equity                                 573        548        1,318        665 
------------------------------  -----  ---------  ---------  -----------  --------- 
Current liabilities 
Trade and other payables           14      3,712         78        3,640         78 
Loans, borrowings, and lease 
 liabilities                       16        462        350          109          - 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total current liabilities                  4,174        428        3,749         78 
------------------------------  -----  ---------  ---------  -----------  --------- 
Non-current liabilities 
Loans, borrowings, and lease 
 liabilities                       16      1,579      1,000        1,980      1,350 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total non-current liabilities              1,579      1,000        1,980      1,350 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total liabilities                          5,753      1,428        5,729      1,428 
------------------------------  -----  ---------  ---------  -----------  --------- 
Total equity and liabilities               6,326      1,976        7,047      2,093 
------------------------------  -----  ---------  ---------  -----------  --------- 
 

Statements of Changes in Equity

For the year ended 31 May 2023

 
                                   Called up   Share option    Retained     Total 
                               share capital        reserve    earnings    equity 
Group                                 US$000         US$000      US$000    US$000 
---------------------------  ---------------  -------------  ----------  -------- 
Balance as at 31 May 2021              6,334             42     (4,684)     1,692 
Total comprehensive loss 
 for the year: 
Loss for the year                          -              -       (374)     (374) 
Balance as at 31 May 2022              6,334             42     (5,058)     1,318 
Total comprehensive profit 
 for the year: 
Loss for the year                          -              -       (745)     (745) 
Balance as at 31 May 2023              6,334             42     (5,803)       573 
---------------------------  ---------------  -------------  ----------  -------- 
 
 
                                   Called up   Share option    Retained     Total 
                               share capital        reserve    earnings    equity 
  Company                             US$000         US$000      US$000    US$000 
---------------------------  ---------------  -------------  ----------  -------- 
Balance as at 31 May 2021              6,334             42     (5,516)       860 
Total comprehensive loss 
 for the year: 
Loss for the year                          -              -       (195)     (195) 
Balance as at 31 May 2022              6,334             42     (5,711)       665 
Total comprehensive profit 
 for the year: 
Loss for the year                          -              -       (117)     (117) 
Balance as at 31 May 2023              6,334             42     (5,828)       548 
---------------------------  ---------------  -------------  ----------  -------- 
 

Consolidated Statement of Cash Flows

For the year ended 31 May 2023

 
                                                              Note     202 3      2022 
                                                                      US$000    US$000 
------------------------------------------------------------  ----  --------  -------- 
Cash flows from operating activities 
Loss before income tax                                                (745 )     (374) 
Adjustments for: 
 
  *    Depreciation of property, equipment, and motor 
       vehicles                                                  9       137       128 
 
  *    Amortisation of intangible assets                         8         5         7 
 
  *    R ent concessions received                               19      (18)       (2) 
 
  *    Lo an interest paid                                               101       101 
 
  *    R e-recognition of PPP loan                              15         -        48 
 
  *    (Increase) / decrease in movement of restricted cash             (60)       768 
 
  *    Increase in lease liabilities                                      59       2 5 
 
  *    Other foreign exchange movements                                 (47)      (66) 
Changes in working capital: 
 
  *    (Increase) / decrease in receivables                           (18 8)       706 
 
  *    Increase / (decrease) i n payables                                 72   (1,355) 
------------------------------------------------------------  ----  --------  -------- 
Net cash used in operating activities                                  (684)      (14) 
------------------------------------------------------------  ----  --------  -------- 
Cash flows from investing activities 
Purchase of intangible assets                                    8    (1 3 )       (6) 
Purchase of property, equipment, and motor vehicles              9     ( 13)         - 
Net cash used in investing activities                                   (26)       (6) 
------------------------------------------------------------  ----  --------  -------- 
Cash flows from financing activities 
L oan i nterest paid                                                   (101)     (101) 
Payment of lease liabilities - principal                        19     ( 89)     ( 92) 
Payment of lease liabilities - interest                         19     ( 59)     ( 25) 
R ent concessions received                                      19        18         2 
Repayment of loans and borrowings                                      ( 20)      ( 6) 
Net cash used in financing activities                           16     (251)     (222) 
------------------------------------------------------------  ----  --------  -------- 
Net ( decrease) / increase in cash and cash equivalents                (961)     (242) 
Cash and cash equivalents at beginning of year                         3,062    3,2 38 
Exchange g ains / (losses) on cash and cash equivalents                   47        66 
Cash and cash equivalents at end of year                        12     2,148     3,062 
------------------------------------------------------------  ----  --------  -------- 
 

Notes to the Financial Statements

For the year ended 31 May 2023

   1    Reporting entity 

Webis Holdings plc (the "Company") is a company domiciled in the Isle of Man. The address of the Company's registered office is Viking House, Nelson Street, Douglas, Isle of Man, IM1 2AH. The Webis Holdings plc consolidated financial statements as at and for the year ended 31 May 2023 consolidate those of the Company and its subsidiaries (together referred to as the "Group"). The Group's primary activities are the provision of pari-mutuel wagering services, through its Isle of Man and USA based subsidiaries and the hosting of harness racing, through its USA based subsidiary.

1.1 Basis of preparation

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with UK Adopted - International Accounting Standards. They were authorised for issue by the Board on 29/11/2023.

The Group has consistently applied the accounting policies as set out in note 1.2 to all periods presented in these financial statements.

Functional and presentational currency

These financial statements are presented in US Dollars which is the Company's functional and presentational currency. Financial information presented in US Dollars has been rounded to the nearest thousand, unless otherwise indicated. All continued operations of the Group have US Dollars as their functional currency.

Other information presented

In line with the Isle of Man Companies Acts 1931-2004, the Company also presents Parent Company Statements of Financial Position, the Parent Company Statement of Changes in Equity and related disclosures. The Company applies the requirements of UK Adopted International Accounting Standards, as indicated in the relevant accounting policies below, when preparing the Company statement of financial position and related notes.

(b) Basis of measurement

The Group consolidated financial statements are prepared under the historical cost convention except where assets and liabilities are required to be stated at their fair value.

(c) Use of estimates and judgement

The preparation of the Group financial statements in conformity with UK Adopted - International Accounting Standards requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income, and expenses. Although these estimates are based on management's best knowledge and experience of current events and expected economic conditions, actual results may differ from these estimates.

The Directors consider the only critical estimate area to be as follows:

-- Note 21 - the measurement of Expected Credit Loss ("ECL") allowance for trade and other receivables and assessment of specific impairment allowances where receivables are past due.

Going concern

The Group and Parent Company financial statements have been prepared on a going concern basis.

As indicated in the statement of comprehensive income, the Group has incurred a net loss in the current year of US $ 745,000 (2022: loss of US $ 374,000) and due to that, net assets reduced from US $ 1,318,000 to US$ 573,000. WatchandWager.com Ltd generated a profit of US$ 99,000, while WatchandWager.com LLC incurred a loss of US$ 727,000.

Based on forecasts prepared by the Directors, the Group and the Company will sustain losses to November 2024 and is dependent on continued financial support from Galloway Limited in order to continue its operations and implement growth strategies. To this end, in September 2023, Galloway Limited has agreed a new convertible loan of GBP 750,000, which will assist in investing the Group's business-to-customer sector, including a programme of software developments of its main website www.watchandwager.com and marketing the mobile product.

The Directors have also announced that the Group and the Company will seek to further invest in key marketing techniques, especially player recruitment and retention with special focus on online marketing techniques.

This aligns with the Group and the Company's ongoing strategies, which are pursued in order to help achieve and maintain its goal of profitability and maintaining adequate liquidity in order to continue its operations, with these strategies including:

-- broadening the Group's client base and the continued expansion of its business to customer base;

-- continuing to renew and acquire further US state regulated gaming licenses and continuing to develop and expand the Cal Expo racetrack operation; and

-- taking advantage of the anticipated regulatory change in the State of California's adoption of sports betting legislation which will further open up opportunities for the Group.

Whilst the Directors continue to assess all strategic options in relation to the strategies noted in the previous paragraph, the Directors recognize that the ultimate success of strategies adopted is difficult to predict as they require additional liquidity to pursue the required investment, including bonds to be placed with the relevant authorities to allow for betting on those tracks and excess cost to be paid to service providers to add more servers to allow for increased number of users. The Directors have prepared cash flow forecasts for a period of 12 months from the date of approval of these financial statements which indicate that, taking account of reasonably possible downsides, and with consideration of the additional financial support received from Galloway Limited in September 2023, the Group and the Company are projected to have sufficient funds. Projections are inherently uncertain (also considering the history of losses) and, in that regard, Galloway Limited has committed to extend funding in case the Group and the Company face any difficulty in meeting their liabilities as they fall due for that period.

The Group and the Company have, in previous years, received financial support from Galloway Limited ( r elated entity) and Galloway Limited has expressed its willingness to continue to make funds available as and when needed by the Group and the Company . The loan s from Galloway Limited stand at US $ 1,350,000 as at 31 May 202 3, with additional funding of GBP 750,000 agreed in September 2023 .

As with any company placing reliance on other parties for financial support, the Directors acknowledge that there can be no certainty that this support will continue, although, at the date of approval of these financial statements, they have no reason to believe that it will not do so.

Based on these indications and factors, the Directors believe that it remains appropriate to prepare the financial statements on a going concern basis.

1.2 Summary of significant accounting policies

During the current year the Group adopted all the new and revised IFRSs that are relevant to its operation and are effective for accounting periods beginning on 1 June 2022. No adoptions had a material effect on the accounting policies of the Group.

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.

Basis of consolidation

The consolidated financial statements incorporate the results of the Group. Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue until the date that such control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.

Inter-company transactions, balances, and unrealised gains on transactions between the Group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the G roup's accounting policies.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). As the primary activities of the Group and the primary transactional currency of the Group's customers are carried out in US Dollars, the consolidated financial statements have been presented in US Dollars, which is the Company's presentational and functional currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of

such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings are presented in the income statement within 'Finance income' or 'Finance costs'. All other foreign exchange gains and losses are presented in the income statement within 'Other (losses)/gains'.

Revenue from contracts with customers

The Group generates revenue primarily from the provision of wagering services and the hosting of races on which guests are entitled to participate in the related wagering services. Revenue is measured at fair value based on the consideration specified in a contract with a customer. The Group recognises revenue when it discharges services to a customer. Revenue has been disaggregated by geographical locations which are consistent with the operating segments (note 2).

Hosting fees (Racetrack operations) are recognised when the customers participate in the Group's pari-mutuel pools and the race audio visual signals are transmitted. Hosting fees are recorded on a gross receipts basis.

Wagering revenue from the Group's activities as the race host is recognised when a race on which wagers are placed is completed. The wagering commission from the Group's commingling of its wagering pools with a host's pool is recognised when the race on which those wagers are placed is completed. The Group acts as a principal when it allows customers to place wagers in the races it hosts and as an agent when it allows customers to place wagers in other entities' races. Where the Group acts as a principal, the entire wager is recognised as revenue and where it is an agent the wagering commission the Group retains is recognised as revenue.

Settlement terms for revenue where the Group acts as a host is usually 7 days for on and off-track wagering and 30 days from month end for ADW wagering. Where the Group acts as an agent, settlement terms are typically 30 days from month end.

Transactions fees (ADW operations) are recognised when the Group facilitates customers' deposit transactions into their betting accounts. The Group recognises revenue for transaction services net of related winnings.

Cost of sales

The Group recognises cost of sales related to the Racetrack operations in which it is the race host. The cost of sales includes direct costs such as purses, hub fees, import fees, pay-outs, and other statutory distributions.

Government grants

The Group initially recognises government grants, that compensate for expenses incurred, as deferred income at fair value if there is a reasonable assurance that they will be received. They are then recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised.

Segmental reporting

Segmental reporting is based on the business areas in accordance with the Group's internal reporting structure, which allows the individual operating segments to be identified by the disparate nature of the principal activity they undertake. The Group determines and presents segments based on the information that internally is provided to the Board and Managing Director, the Group's chief operating decision maker.

An operating segment is a component of the Group and engages in business activities from which it may earn revenues and incur expenses. An operating segment's operating results are reviewed regularly by the Board and Managing Director to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Current tax also includes any tax arising from dividends. Current tax assets and liabilities are offset only if certain criteria are met.

Deferred income tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from

the initial recognition of goodwill; deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liability, where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Only where there is an agreement in place that gives the Group the ability to control the reversal of the temporary difference is the liability not recognised.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes, assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Intangible assets - goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group's interest in net fair value of the net identifiable assets, liabilities, and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units ("CGUs"), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Intangible assets - other

(a) Trademarks and licences

Separately acquired trademarks and licences are shown at historical cost. Trademarks and licences acquired in a business combination are recognised at fair value at the acquisition date. Trademarks and licences have a finite useful life and are carried at cost less accumulated amortisation and any accumulated impairment. Amortisation is calculated using the straight-line method to allocate the cost of trademarks and licences over their estimated useful lives of three years. Renewal costs are expensed in the year they relate to.

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three years.

(b) Website design and development costs

Costs associated with maintaining websites are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique websites controlled by the Group are recognised as intangible assets when the following criteria are met:

-- it is technically feasible to complete the website so that it will be available for use;

   --           management intends to complete the website and use it; 
   --           there is an ability to use the website; 

-- it can be demonstrated how the website will generate probable future economic benefits;

-- adequate technical, financial, and other resources to complete the development and to use the website are available; and

-- the expenditure attributable to the website during its development can be reliably measured.

Directly attributable costs that are capitalised as part of the website include the website employee costs and an appropriate portion of relevant overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Website development costs recognised as assets are amortised over their estimated useful lives, which do not exceed three years.

Property, equipment, and motor vehicles

Items of property, equipment and motor vehicles are stated at historical cost less accumulated depreciation (see below) and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the financial position date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Depreciation is calculated using the straight-line method to allocate the cost of property, equipment, and motor vehicles over their estimated useful lives.

The estimated useful lives of property, equipment and motor vehicles for current and comparative periods are as follows:

Motor vehicles 5 years Fixtures and fittings 3 years

   Plant and equipment                                                    3-5 years 

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within 'Other gains/(losses) - net' in the income statement.

Investment in subsidiary

A subsidiary is an entity controlled by the entity. The Company controls an investee when the Company is exposed or has rights to variable returns from its involvement with the investee and can affect the return through its power over the investee. Control exists when the Company has the power to govern the financial and operating policies of an entity to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are considered.

Investment in subsidiaries are initially recognized at cost. At subsequent reporting dates, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying amounts of investments are adjusted accordingly. Impairment losses are recognized as an expense. Where impairment losses subsequently reverse, the carrying amounts of the investments are increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of impairment loss is recognized in the profit or loss.

Share-based payment expense

The Group and the Company operate an equity-settled, share-based compensation plan, under which the entity receives services from employees as consideration for equity instruments (options) of the Group and the Company. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

-- including any market performance conditions (for example, an entity's share price); and

-- excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time-period).

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity.

When the options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

Equity

Share capital is determined using the nominal value of shares that have been issued.

Equity settled share-based employee remuneration is credited to the share option reserve until related stock options are exercised. On exercise or lapse, amounts recognised in the share option reserve are taken to share capital.

Retained earnings include all current and prior period results as determined in the income statement and any other gains or losses recognised in the Statement of Changes in Equity.

Financial instruments

Recognition and measurement

Non-derivative financial instruments include trade and other receivables, cash and cash equivalents, bonds and deposits, borrowings and trade and other payables.

Financial assets and financial liabilities are recognised on the Group and the Company's balance sheet when the Group and/or the Company become party to the contractual terms of the instrument. Transaction costs are included in the initial measurement of financial instruments, except financial instruments classified as at fair value through profit or loss. The subsequent measurement of financial instruments is dealt with below.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Cash and cash equivalents

Cash and cash equivalents are defined as cash in bank and in hand as well as bank deposits, money held for processors and cash balances held on trust for the customers entitled to them. Cash equivalents are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes. These are subsequently measured at amortized cost as stated under "Impairment of financial assets" below.

Bonds and deposits

Bonds and deposits are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Borrowings

Interest-bearing borrowings and overdrafts are recorded at the proceeds received net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs are charged on an accrual basis using the effective interest method and are added to the carrying amount of the instrument.

Trade and other payables

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Impairment of financial assets

The Group and the Company use an impairment model that applies to financial assets measured at amortised cost and contract assets and is detailed below. Financial assets at amortised cost include trade receivables, cash and cash equivalents, bonds and deposits.

Performing financial assets

Stage 1 (0-30 Days)

From initial recognition of a financial asset to the date on which an asset has experienced a significant increase in credit risk relative to its initial recognition, a stage 1 loss allowance is recognised equal to the credit losses expected to result from its default occurring over the next 12 months ('12-month ECL').

Stage 2 (31-90 Days)

Following a significant increase in credit risk relative to the initial recognition of the financial asset, a stage 2 loss allowance is recognised equal to the credit losses expected from all possible default events over the remaining lifetime of the asset ('Lifetime ECL'). The assessment of whether there has been a significant increase in credit risk requires considerable judgment, based on the lifetime probability of default ('PD'). Any financial asset that had been outstanding for greater than 30 days would be assessed on an individual basis to determine if it qualified as a significant increase in credit risk. Stage 1 and 2 allowances are held against performing loans; the main difference between stage 1 and stage 2 allowances is the time horizon. Stage 1 allowances are estimated using the PD with a maximum period of 12 months, while stage 2 allowances are estimated using the PD over the remaining lifetime of the asset.

Impaired financial assets

Stage 3 (After 90 Days)

When a financial asset is considered to be credit-impaired, the allowance for credit losses ('ACL') continues to represent lifetime expected credit losses, however, interest income is calculated based on the amortised cost of the asset, net of the loss allowance, rather than its gross carrying amount.

The Group applies the ECL model to two main types of financial assets that are measured at amortised cost:

Trade receivables, to which the simplified approach (provision matrix) prescribed by IFRS 9 is applied. This approach requires the recognition of a Lifetime ECL allowance on day one. In the normal course of operations, trade receivables could be considered to be in default after 90 days.

Other financial assets at amortised cost, to which the general three stage model (described above) is applied, whereby a 12-month ECL is recognised initially and the balance is monitored for significant increases in credit risk which triggers the recognition of a Lifetime ECL allowance.

ECLs are a probability-weighted estimate of credit losses. ECLs for financial assets that are not credit-impaired at the reporting date are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due in accordance with the contract and the cash flows that the Company expects to receive). ECLs for financial assets that are credit-impaired at the reporting date are measured as the difference between the gross carrying amount and the present value of estimated future cash flows. ECLs are discounted at the effective interest rate of the financial asset which is 0% for all financial assets at amortised cost. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. The measurement of ECLs considers information about past events and current conditions, as well as supportable information about future events and economic conditions. The Group reviews its impairment methodology for estimating the ECLs, taking into account forward-looking information in determining the appropriate level of allowance. In addition, it identifies indicators and set up procedures for monitoring for significant increases in credit risk.

Leases

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

i. As a lessee

The Group recognises a right-of-use asset and a lease liability at the lease commencement/modification date. The right-of-use asset is initially measured at cost, and subsequently at cost less accumulated depreciation and impairment loss and adjusted for certain remeasurements of the lease liability.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at the Group's applicable incremental borrowing rate (if the rate implicit in the lease cannot be determined). The Group has measured the incremental borrowing as equal to external borrowing rates. The lease liability is subsequently increased by the interest cost of the lease liability and decreased by the lease payment made. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is reasonably certain to be exercised, or a termination option is reasonably certain not to be exercised.

The Group has applied judgment to determine the lease term for some lease contracts in which it is a lessee that include renewal options. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which affects the amount of lease liabilities and right of use assets recognised.

The Group receives rent concessions on its racetrack lease when, due to external factors, the number of days raced in a season is lower than the actual number of days scheduled to be raced.

The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and the type of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

- Fixed payments, including in-substance fixed payments;

- Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date;

- Amounts expected to be payable under a residual value guarantee; and

- The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option or if there is a revised in-substance fixed lease payment.

When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

The Group presents right-of-use assets that do not meet the definition of investment property in 'property, equipment, and motor vehicles' and lease liabilities in 'loans, borrowings and lease liabilities' in the statement of financial position.

The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value items and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Employee benefits

(a) Pension obligations

The Group and the Company do not operate any post-employment schemes, including both defined benefit and defined contribution pension plans.

(b) Short-term employee benefits

Short-term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accrual's basis over the period in which employees have provided services in the year. All expenses related to employee benefits are recognised in the Statement of Comprehensive Income in operating costs.

(c) Profit sharing and bonus plans

The Group and the Company recognises a liability and an expense for bonuses and profit sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group and the Company recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. Any recognised liability would be settled within 12 months of the year end.

Standards and interpretations in issue not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective for the year and have not been applied in preparing these consolidated financial statements. The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Group's financial statements in the period of initial application.

 
 Standards                                                                     Effective date 
                                                                          (accounting periods 
                                                                                commencing on 
                                                                                    or after) 
 IFRS 17 Insurance Contracts                                                   1 January 2023 
  Classification of liabilities as current or non-current 
  (Amendments to IAS 1) 
  Amendments to IFRS 17 
  Disclosure of Accounting Policies (Amendments to IAS1 
  and IFRS Practice Statement 2) 
  Definition of Accounting Estimate (Amendments to IFRS 
  8) 
  Deferred Tax related Asset and Liabilities Arising 
  from a Single Transaction - Amendments to IAS 12 Income                      1 January 2024 
  Taxes 
  Sale or Contribution of Assets between an Investor 
  and its Associate or Joint Ventures (Amendments to 
  FRS 10 and IAS 28) 
  Non-current Liabilities with Covenants and Classification 
  of Liabilities as Current or Non-current (Amendments 
  to IAS 1) 
 Lease Liability in a Sale and Leaseback (Amendments 
  to IFRS 16) 
  Supplier Finance Arrangements (Amendments to IAS 7 
  and IFRS 7) 
 IFRS S1 General requirements for Disclosure of Sustainability-related 
  Financial Information and IFRS S2 Climate-related Disclosures 
  Lack of Exchangeability (Amendments to IAS 21)                               1 January 2025 
 
   2    Operating Segments 
   A.    Basis for segmentation 

The Group has two operating segments, which are its reportable segments. The segments offer different services in relation to various forms of pari-mutuel racing, which are managed separately due to the nature of their activities.

Reportable segments and operations provided

Racetrack operations - hosting of races through the management and operation of a racetrack facility, enabling patrons to attend and wager on horse racing, as well as utilise simulcast facilities.

ADW operations - provision of online ADW services to enable customers to wager into global racetrack betting pools.

The Group's Board of Directors review the internal management reports of the operating segment on a monthly basis.

   B.    Information about reportable segments 

Information relating to the reportable segments is set out below. Segment revenue along with segment profit / (loss) before tax are used to measure performance as management considers this information to be a relevant indicator for evaluating the performance of the segments.

 
                                                     Reportable segments 
                                                                           Corporate 
                                                                           operating 
                                                    Racetrack        ADW       costs     Total 
                                                         2023       2023        2023      2023 
                                                       US$000     US$000      US$000    US$000 
------------------------------------------------  -----------  ---------  ----------  -------- 
External revenues                                      47,865      2,155           -    50,020 
Segment revenue                                        47,865      2,155           -    50,020 
------------------------------------------------  -----------  ---------  ----------  -------- 
Segment profit / (loss) before 
 tax                                                       46      (674)       (117)     (745) 
Interest expense                                         (58)        (3)        (99)     (160) 
Depreciation and amortisation                            (98)       (42)         (2)     (142) 
Other material non-cash items: 
 
  *    Impairment movement on trade receivables             -        (2)           -       (2) 
------------------------------------------------  -----------  ---------  ----------  -------- 
Segment assets                                          2,187      2,846       1,293     6,326 
------------------------------------------------  -----------  ---------  ----------  -------- 
Segment liabilities                                     1,523      2,802       1,428     5,753 
------------------------------------------------  -----------  ---------  ----------  -------- 
                                                     Reportable segments 
                                                                           Corporate 
                                                                           operating 
                                                    Racetrack        ADW       costs     Total 
                                                         2022       2022        2022      2022 
                                                       US$000     US$000      US$000    US$000 
-------------------------------------------------  ----------  ---------  ----------  -------- 
External revenues                                      51,225      2,387           -    53,612 
Segment revenue                                        51,225      2,387           -    53,612 
-------------------------------------------------  ----------  ---------  ----------  -------- 
Segment profit / (loss) before 
 tax                                                      259      (438)       (195)     (374) 
Interest expense                                         (22)        (6)        (98)     (126) 
Depreciation and amortisation                            (88)       (44)         (3)     (135) 
Other material non-cash items: 
 
  *    Impairment movement on trade receivables             -         11           -        11 
-------------------------------------------------  ----------  ---------  ----------  -------- 
Segment assets                                          2,324      3,387       1,336     7,047 
-------------------------------------------------  ----------  ---------  ----------  -------- 
Segment liabilities                                     1,522      2,779       1,428     5,729 
-------------------------------------------------  ----------  ---------  ----------  -------- 
 
 

C. Reconciliations of information on reportable segments to the amounts reported in the financial statements

 
                                                   2023     2022 
                                                 US$000   US$000 
----------------------------------------------  -------  ------- 
i. Revenues 
Total revenue for reportable segments            50,020   53,612 
----------------------------------------------  -------  ------- 
Consolidated revenue                             50,020   53,612 
----------------------------------------------  -------  ------- 
ii. Loss before tax 
Total loss before tax for reportable segments     (628)    (179) 
Loss before tax for other segments                (117)    (195) 
----------------------------------------------  -------  ------- 
Consolidated loss before tax                      (745)    (374) 
----------------------------------------------  -------  ------- 
iii. Assets 
Total assets for reportable segments              5,033    5,711 
Assets for other segments                         1,293    1,336 
----------------------------------------------  -------  ------- 
Consolidated total assets                         6,326    7,047 
----------------------------------------------  -------  ------- 
iv. Liabilities 
Total liabilities for reportable segments         4,325    4,301 
Liabilities for other segments                    1,428    1,428 
----------------------------------------------  -------  ------- 
Consolidated total liabilities                    5,753    5,729 
----------------------------------------------  -------  ------- 
v. Other material items 
Interest expense                                  (160)    (126) 
Depreciation and amortisation                     (142)    (135) 
Impairment movement on trade receivables            (2)       11 
----------------------------------------------  -------  ------- 
 

There were no reconciling items noted between Segment information and the Financial Statements.

   D.    Geographic information 

i. Revenues

The below table analyses the geographic location of the customer base of the operating segments.

 
                                          2023     2022 
                                        US$000   US$000 
---------------------  --------------  -------  ------- 
Revenue 
Racetrack operations    North America   47,865   51,225 
ADW operations          North America    1,701    1,833 
                              British 
ADW operations                  Isles      428      527 
ADW operations              Caribbean       26       27 
                                        50,020   53,612 
 ------------------------------------  -------  ------- 
 
 

ii. Non-current assets

The geographical information below analyses the Group's non-current assets by the Company's Country of Domicile (Isle of Man) and the United States of America. Information is based on geographical location of the Group's assets.

 
                               2023     2022 
                             US$000   US$000 
-------------------------   -------  ------- 
United States of America        618      731 
Isle of Man                       2        4 
                                620      735 
 -------------------------  -------  ------- 
 

Non-current assets exclude financial instruments. During the year, additions to non-current assets for the reportable segments were Racetrack US$ 13,000 (2022: US$ 411,000) and ADW US$ 74,000 (2022: US$ 67,000).

   E.    Major customers 

The Group does not earn revenue of 10% or more from any external customer.

   3    Operating loss 
 
                                                             2023     2022 
Operating loss is stated after charging:                   US$000   US$000 
--------------------------------------------------------  -------  ------- 
Auditors' remuneration - audit                                146      153 
Depreciation of property, equipment, and motor vehicles       137      128 
Amortisation of intangible assets                               5        7 
Exchange (gains) / losses                                     (9)        7 
Directors' fees                                               105       96 
--------------------------------------------------------  -------  ------- 
 
   4    Finance costs 
 
                              2023     2022 
                            US$000   US$000 
-------------------------  -------  ------- 
Bank interest receivable         7        - 
Loan interest payable        (160)    (126) 
-------------------------  -------  ------- 
Net finance costs            (153)    (126) 
-------------------------  -------  ------- 
 
   5    Staff numbers and cost 
 
 
                                                          2023    2022 
--------------------------------------------------------  ----  ------ 
Average number of employees - Pari-mutuel and Racetrack 
 Operations                                                 50      52 
--------------------------------------------------------  ----  ------ 
 
 
The aggregate payroll costs of these persons were as 
 follows: 
                                                          2023      2022 
 Pari-mutuel and Racetrack Operations                   US$000    US$000 
-----------------------------------------------------  -------  -------- 
Wages and salaries                                       1,694     1,707 
Social security costs                                      121       127 
                                                         1,815     1,834 
-----------------------------------------------------  -------  -------- 
 
   6    Income tax expense 
   (a)   Current and Deferred Tax Expenses 

The current and deferred tax expenses for the year were US$ Nil (2022: US$ Nil). Despite having made losses, no deferred tax was recognised as there is no reasonable expectation that the Group will recover the resultant deferred tax assets.

   (b)   Tax Rate Reconciliation 
 
                                           2023     2022 
                                         US$000   US$000 
--------------------------------------  -------  ------- 
Loss before tax                           (745)    (374) 
Tax charge at IOM standard rate (0%)          -        - 
Adjusted for: 
Tax credit for US tax losses (at 21%)     (153)     (91) 
Add back tax losses not recognised          153       91 
--------------------------------------  -------  ------- 
Tax charge for the year                       -        - 
--------------------------------------  -------  ------- 
 

The maximum deferred tax asset that could be recognised at year end is approximately US$ 1,137,000 (2022: US$ 985,000). The Group has not recognised any asset as it might not be recoverable within the allowed period. The tax losses for tax years beginning in January 2018 are currently permitted to be carried forward indefinitely. Tax losses incurred prior to that period expire after 20 years.

   7    Earnings per ordinary share 

The calculation of the basic earnings per share is based on the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during the year.

The calculation of diluted earnings per share is based on the basic earnings per share, adjusted to allow for the issue of shares, on the assumed conversion of all dilutive share options.

An adjustment for the dilutive effect of share options in the current period has not been reflected in the calculation of the diluted profit per share, as the effect would have been anti-dilutive.

 
                                                              2023         2022 
                                                            US$000       US$000 
-----------------------------------------------------  -----------  ----------- 
Loss for the year                                            (745)        (374) 
-----------------------------------------------------  -----------  ----------- 
                                                               No.          No. 
-----------------------------------------------------  -----------  ----------- 
Weighted average number of ordinary shares in issue    393,338,310  393,338,310 
Dilutive element of share options if exercised (note 
 17)                                                    14,000,000   14,000,000 
-----------------------------------------------------  -----------  ----------- 
Diluted number of ordinary shares                      407,338,310  407,338,310 
-----------------------------------------------------  -----------  ----------- 
Basic earnings per share (cents)                            (0.19)       (0.10) 
-----------------------------------------------------  -----------  ----------- 
Diluted earnings per share (cents)                          (0.18)       (0.09) 
-----------------------------------------------------  -----------  ----------- 
 

The earnings applied are the same for both basic and diluted earnings calculations per share as there are no dilutive effects to be applied.

   8    Intangible assets 
 
                                                Software & development             Total 
                                     Goodwill            costs 
----------------------------  ---------------  ------------------------  ------------------------- 
                                        Group        Group      Company    Group           Company 
                                       US$000       US$000       US$000   US$000            US$000 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
Cost 
Balance at 1 June 2021                    177          606           15      783                15 
Additions during the year                   -            6            -        6                 - 
Balance at 31 May 2022                    177          612           15      789                15 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
Balance at 1 June 2022                    177          612           15      789                15 
Additions during the year                   -           13            -       13                 - 
Disposals/decommissioned 
 assets                                     -          (8)          (1)      (8)               (1) 
Balance at 31 May 2023                    177          617           14      794                14 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
Amortisation and Impairment 
Balance at 1 June 2021                    177          594           15      771                15 
Amortisation for the year                   -            7            -        7                 - 
Balance at 31 May 2022                    177          601           15      778                15 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
Balance at 1 June 2022                    177          601           15      778                15 
Amortisation for the year                   -            5            -        5                 - 
Disposals/decommissioned 
 assets                                     -          (8)          (1)      (8)               (1) 
Balance at 31 May 2023                    177          598           14      775                14 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
Carrying amounts 
At 1 June 2021                              -           12            -       12                 - 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
At 31 May 2022                              -           11            -       11                 - 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
At 31 May 2023                              -           19            -       19                 - 
----------------------------  ---------------  -----------  -----------  -------  ---------------- 
 

The Group reviews intangible assets annually for impairment or more frequently if there are indications that the intangible assets may be impaired (see note 1). The carrying amount of US$ 19,000 of software and development costs relates primarily to development and integration costs of the US based wagering website. These assets will be fully amortised within the next 3 years.

   9    Property, equipment, and motor vehicles 
 
                                         Fixtures, 
                                          Fittings 
                              Computer     & Track      Motor    Right-of- 
                             Equipment   Equipment   Vehicles   use Assets    Total 
Group                           US$000      US$000     US$000       US$000   US$000 
--------------------------  ----------  ----------  ---------  -----------  ------- 
Cost 
Balance at 1 June 2021             166         321         50          473    1,010 
Additions during the year            -           -          -          472      472 
Balance at 31 May 2022             166         321         50          945    1,482 
--------------------------  ----------  ----------  ---------  -----------  ------- 
Balance at 1 June 2022             166         321         50          945    1,482 
Additions during the year            -          13          -           61       74 
Disposals/decommissioned 
 assets                           (49)           -          -        (118)    (167) 
Balance at 31 May 2023             117         334         50          888    1,389 
--------------------------  ----------  ----------  ---------  -----------  ------- 
Depreciation 
Balance at 1 June 2021             160         250         24          196      630 
Charge for the year                  3          18          7          100      128 
Balance at 31 May 2022             163         268         31          296      758 
--------------------------  ----------  ----------  ---------  -----------  ------- 
Balance at 1 June 2022             163         268         31          296      758 
Charge for the year                  2          20          7          108      137 
Disposals/decommissioned 
 assets                           (49)           -          -        (118)    (167) 
Balance at 31 May 2023             116         288         38          286      728 
--------------------------  ----------  ----------  ---------  -----------  ------- 
Carrying amounts 
At 1 June 2021                       6          71         26          277      380 
--------------------------  ----------  ----------  ---------  -----------  ------- 
At 31 May 2022                       3          53         19          649      724 
--------------------------  ----------  ----------  ---------  -----------  ------- 
At 31 May 2023                       1          46         12          602      661 
--------------------------  ----------  ----------  ---------  -----------  ------- 
 
 
                                         Fixtures 
                              Computer          & 
                             Equipment   Fittings    Total 
Company                         US$000     US$000   US$000 
--------------------------  ----------  ---------  ------- 
Cost 
Balance at 1 June 2021              37         80      117 
Additions during the year            -          -        - 
Balance at 31 May 2022              37         80      117 
--------------------------  ----------  ---------  ------- 
Balance at 1 June 2022              37         80      117 
Additions during the year            -          -        - 
Balance at 31 May 2023              37         80      117 
--------------------------  ----------  ---------  ------- 
 
 
 
                                      Fixtures 
                           Computer          & 
                          Equipment   Fittings    Total 
Company                      US$000     US$000   US$000 
-----------------------  ----------  ---------  ------- 
Depreciation 
Balance at 1 June 2021           31         80      111 
Charge for the year               3          -        3 
Balance at 31 May 2022           34         80      114 
-----------------------  ----------  ---------  ------- 
Balance at 1 June 2022           34         80      114 
Charge for the year               2          -        2 
Balance at 31 May 2023           36         80      116 
-----------------------  ----------  ---------  ------- 
Carrying amounts 
At 1 June 2021                    6          -        6 
-----------------------  ----------  ---------  ------- 
At 31 May 2022                    3          -        3 
-----------------------  ----------  ---------  ------- 
At 31 May 2023                    1          -        1 
-----------------------  ----------  ---------  ------- 
 

10 Investments in Subsidiaries

Investments in subsidiaries are held at cost less impairment. Details of investments are as follows:

 
 
                                                                           2023           2022 
                        Country of                                      Holding    Holding (%) 
Subsidiaries             incorporation   Activity                           (%) 
----------------------  ---------------  ---------------------------  ---------  ------------- 
                                         Operation of interactive 
WatchandWager.com                         wagering 
 Limited                Isle of Man       totaliser hub                     100            100 
                                         Operation of interactive 
                                          wagering 
WatchandWager.com       United States     totaliser hub and harness 
 LLC                     of America       racetrack                         100            100 
betinternet.com (IOM) 
 Limited                Isle of Man      Dormant                            100            100 
Technical Facilities 
 & Services Limited     Isle of Man      Dormant                              -            100 
 

A wholly owned subsidiary, Technical Facilities & Services Limited, was dissolved during the 31 May 2023 financial year. A wholly owned subsidiary, B. E. Global Services Limited, was dissolved during the 31 May 2022 financial year. Impairment assessment is performed annually, and this involves assessment of the net asset value and profitability of the subsidiaries.

11 Bonds and deposits

 
                                 2023     2022 
                               US$000   US$000 
----------------------------  -------  ------- 
Bonds and deposits - expire 
 within one year                  883      883 
Bonds and deposits - expire 
 within one to two years            -        - 
Bonds and deposits - expire 
 within two to five years           -        - 
Bonds and deposits - expire 
 more than five years             100      100 
----------------------------  -------  ------- 
                                  983      983 
----------------------------  -------  ------- 
 

Cash bonds of US$ 875,000 have been paid as security deposits in relation to various US State ADW licences (2022: US$ 875,000). These cash bonds are held in trust accounts used exclusively for cash collateral, with financial institutions which have been screened for their financial strength and capitalization ratio. The financial institutions have a credit rating of A- Excellent from AM Best credit rating agency. Therefore, these bonds are considered to be fully recoverable. A rent deposit of US$ 100,000 is held by California Exposition & State Fair and is for a term ending in 2030 (2022: US$ 100,000). This is held by an entity of the Californian state government and is therefore considered fully recoverable. Rent and other security deposits total US$ 8,167 (2022: US$ 8,227). These deposits are repayable upon completion of the relevant lease term, under the terms of legally binding agreements. The fair value of the bonds and deposits approximates to the carrying value.

12 Cash, cash equivalents and restricted cash

 
                                     Group                Company 
                                   2023          2022        2023         2022 
                                 US$000        US$000      US$000       US$000 
-----------------------------  --------  ------------  ----------  ----------- 
Cash and cash equivalents - 
 Company and other funds          2,148         3,062         116          189 
Restricted cash - protected 
 player funds                     1,137         1,077       1,111        1,077 
-----------------------------  --------  ------------  ----------  ----------- 
Total cash, cash equivalents 
 and restricted cash              3,285         4,139       1,227        1,266 
-----------------------------  --------  ------------  ----------  ----------- 
 
 

The Group holds funds for operational requirements and for its non-Isle of Man customers, shown as 'Company and other funds' and on behalf of its Isle of Man regulated customers and certain USA state customers, shown as 'protected player funds'.

Protected player funds are held in fully protected client accounts within an Isle of Man regulated bank and in segregated accounts within a USA regulated bank. These funds are segregated from operational funds of the Company and are held on trust for the customers entitled to them.

13 Trade and other receivables

 
                                              Group               Company 
                                            2023         2022        2023          2022 
                                          US$000       US$000      US$000        US$000 
------------------------------------   ---------  -----------  ----------  ------------ 
Trade receivables                            612          395           -             - 
Amounts due from Group undertakings            -            -         680           757 
Other receivables and prepayments            766          795          65            64 
-------------------------------------  ---------  -----------  ----------  ------------ 
                                           1,378        1,190         745           821 
 ------------------------------------  ---------  -----------  ----------  ------------ 
 
 

Included within trade receivables are impairment provisions of US$ 68,837 (see note 21), (2022: US$ 67,293). Other receivables include accrued and other income due to the Group, along with sundry other debtors. Amounts due from Group undertakings are unsecured, interest free and repayable on demand.

14 Trade and other payables

 
                                       Group               Company 
                                     2023         2022        2023          2022 
                                   US$000       US$000      US$000        US$000 
-----------------------------   ---------  -----------  ----------  ------------ 
Trade payables                        436          659           8             7 
Amounts due to customers            2,089        2,037           -             - 
Taxes and national insurance           18           16           2             2 
Accruals and other payables         1,169          928          68            69 
------------------------------  ---------  -----------  ----------  ------------ 
                                    3,712        3,640          78            78 
 -----------------------------  ---------  -----------  ----------  ------------ 
 
 

Other payables include distributions and purses payable for the racetrack operations, along with sundry other payables.

15 Deferred income (Government Grant)

The Group received a Paycheck Protection Program ("PPP") loan for US$ 319,994, under the provisions of the US CARES Act in May 2020 to support certain incurred expenses, the provisions of which allowed for an application for loan forgiveness. The Group had ascertained reasonable assurance that the loan should be forgiven in its entirety and the application for forgiveness was submitted in June 2021, with the application agreed by the lending bank. The grant was recognised in profit or loss in the periods that the relevant expenses were recognised. After final review by the Small Business Administration, it was determined that the lending bank had calculated and advanced a loan amount greater than it should have. The resultant difference of US$ 48,427 was recognised as a loan (financial liability) at 31 May 2022 (see note 16). There is no balance in deferred income at 31 May 2023.

16 Loans, borrowings, and lease liabilities

Current liabilities

 
                                              Group              Company 
                                           2023       2022       2023         2022 
                                         US$000     US$000     US$000       US$000 
------------------------------------   --------  ---------  ---------  ----------- 
Unsecured loans (current portion)            21         20          -            - 
Lease liabilities (current portion)          91         89          -            - 
Secured loans - Galloway Limited            350          -        350            - 
                                            462        109        350            - 
 ------------------------------------  --------  ---------  ---------  ----------- 
 
 

Non-current liabilities

 
                                          Group                Company 
                                           2023         2022      2023         2022 
                                         US$000       US$000    US$000       US$000 
---------------------------------   -----------  -----------  --------  ----------- 
Unsecured loans (non-current 
 portion)                                    26           47         -            - 
Lease liabilities (non-current 
 portion)                                   553          583         -            - 
Secured loans - Galloway Limited          1,000        1,350     1,000        1,350 
                                          1,579        1,980     1,000        1,350 
 ---------------------------------  -----------  -----------  --------  ----------- 
 
 

Terms and repayment schedule

 
                                     Nominal                   2023      2022 
                                    interest      Year of     Total     Total 
                                        rate     maturity    US$000    US$000 
-----------------------------     ----------  -----------  --------  -------- 
Unsecured loans                   1.00-8.90%         2025        47        67 
Lease liabilities                 6.00-9.50%      2023-30       644       672 
Secured loan 2017 - Galloway 
 Limited*                              7.75%         2027       500       500 
Secured loan 2019 - Galloway 
 Limited*                              7.00%         2024       350       350 
Secured loan 2020 - Galloway 
 Limited*                              7.00%         2025       500       500 
--------------------------------  ----------  -----------  --------  -------- 
Total loans and borrowings                                    2,041     2,089 
--------------------------------  ----------  -----------  --------  -------- 
 

During 2022, the Group received an unsecured Paycheck Protection Program ("PPP") loan for US$ 48,427, which matures on 7 May 2025 and attracts interest at 1% per annum (see note 15).

The secured loans from Galloway Limited are secured over the unencumbered assets of the Group, which includes the Cash and cash equivalents - Company and other funds of US$ 2,148,000 (2022: US$ 3,062,000) and Cash bonds of US$ 875,000 (2022: US$ 875,000). In September 2023, the Group obtained additional financing from Galloway Limited, which included the Secured loan 2017 of US$ 500,000, being rolled into the new financing (see note 23).

*Based on current interest rates, the estimated fair value of the Galloway Limited loans is US$ 1.078 million.

Reconciliation of movements of liabilities to cash flows arising from financing activities

 
                                   Other loans and 
                                        borrowings  Lease liabilities    Total 
                                            US$000             US$000   US$000 
---------------------------------  ---------------  -----------------  ------- 
Balance at 1 June 2021                       1,375                292    1,667 
---------------------------------  ---------------  -----------------  ------- 
Changes from financing cash 
 flows 
Proceeds from loans, borrowings, 
 and lease liabilities                           -                 25       25 
Repayment of borrowings                        (6)                  -      (6) 
Payment of lease liabilities                     -              (117)    (117) 
Rent concession received                         -                  2        2 
Interest paid                                (101)               (25)    (126) 
---------------------------------  ---------------  -----------------  ------- 
Total changes from financing 
 cash flows                                  (107)              (115)    (222) 
---------------------------------  ---------------  -----------------  ------- 
Other changes 
Liability-related 
Re-recognition of PPP loan                      48                  -       48 
New leases                                       -                472      472 
Rent concession received                         -                (2)      (2) 
Interest expense                               101                 25      126 
Total liability-related other 
 changes                                       149                495      644 
---------------------------------  ---------------  -----------------  ------- 
Balance at 31 May 2022                       1,417                672    2,089 
---------------------------------  ---------------  -----------------  ------- 
 
Balance at 1 June 2022                       1,417                672    2,089 
---------------------------------  ---------------  -----------------  ------- 
Changes from financing cash 
 flows 
Proceeds from loans, borrowings, 
 and lease liabilities                           -                 59       59 
Repayment of borrowings                       (20)                  -     (20) 
Payment of lease liabilities                     -              (148)    (148) 
Rent concession received                         -                 18       18 
Interest paid                                (101)               (59)    (160) 
---------------------------------  ---------------  -----------------  ------- 
Total changes from financing 
 cash flows                                  (121)              (130)    (251) 
---------------------------------  ---------------  -----------------  ------- 
Other changes 
Liability-related 
New leases                                      61                  -       61 
Rent concession received                         -               (18)     (18) 
Interest expense                               101                 59      160 
Total liability-related other 
 changes                                       162                 41      203 
---------------------------------  ---------------  -----------------  ------- 
Balance at 31 May 2023                       1,458                583    2,041 
---------------------------------  ---------------  -----------------  ------- 
 

17 Share capital

 
                                                                   2023      2022 
                                                          No.    US$000    US$000 
------------------------------------------------  -----------  --------  -------- 
Allotted, issued, and fully paid 
At beginning and close of year: ordinary shares 
 of 1p each                                       393,338,310     6,334     6,334 
At 31 May: ordinary shares of 1p each             393,338,310     6,334     6,334 
------------------------------------------------  -----------  --------  -------- 
 

The authorised share capital of the Company is US$ 9,619,000 divided into 600,000,000 ordinary shares of GBP0.01 each (2022: US$ 9,619,000 divided into 600,000,000 ordinary shares of GBP0.01 each). This is the sole class of shares authorised and issued by the Company and these shares convey the right for shareholders to vote at general meetings, to receive dividends and to receive surplus assets on the liquidation of the Company. There are no preferences or restrictions attached to these shares. Neither the Company, nor its subsidiaries, hold any shares in the Company. Share options are shown below.

Options

Movements in share options during the year were as follows:

 
                                                      2023        2022 
----------------------------------------------  ----------  ---------- 
At start of year - number of 1p ordinary 
 shares                                         14,000,000  14,000,000 
----------------------------------------------  ----------  ---------- 
Options granted                                          -           - 
----------------------------------------------  ----------  ---------- 
Options lapsed                                           -           - 
----------------------------------------------  ----------  ---------- 
Options exercised                                        -           - 
----------------------------------------------  ----------  ---------- 
At end of year - number of 1p ordinary shares   14,000,000  14,000,000 
----------------------------------------------  ----------  ---------- 
 

The options were issued on 3 March 2016 to Ed Comins, Managing Director of the Group and vested on 3 March 2019. The options expire on 2 March 2026. The weighted average exercise price of all options is GBP0.01.

18 Capital commitments

As at 31 May 2023, the Group had no capital commitments (2022: US$ Nil).

   19   Leases 

A. Leases as lessee

The Group leases office and racetrack facilities. The office facility is leased until May 2023, with an average length of renewal of between two to three years. This was renewed in 2023 for a further two years. The racetrack facility is leased until May 2030, with extensions or renewals typically ranging between three to five years. Extension/renewal is only available to lessor on terms and conditions to be agreed between both parties. All currently available options to extend have been exercised.

The Group also leases additional office facilities with contract terms of no more than one year. These leases are short-term, and the Group has elected not to recognise right-of-use assets and lease liabilities for these leases.

Information about leases for which the Group is a lessee is presented below.

   i.    Right-of-use assets 

Right-of-use assets related to leased properties that do not meet the definition of investment property are presented within property, equipment, and motor vehicles.

 
                             Property    Total 
Group                          US$000   US$000 
--------------------------   --------  ------- 
Cost 
Balance at 1 June 2021            473      473 
Additions during the year         472      472 
Balance at 31 May 2022            945      945 
---------------------------  --------  ------- 
Balance at 1 June 2022            945      945 
Additions during the year          61       61 
Disposals during the year       (118)    (118) 
Balance at 31 May 2023            888      888 
---------------------------  --------  ------- 
 
 
Depreciation 
Balance at 1 June 2021         196    196 
Charge for the year            100    100 
Balance at 31 May 2022         296    296 
---------------------------  -----  ----- 
Balance at 1 June 2022         296    296 
Charge for the year            108    108 
Disposals during the year    (118)  (118) 
Balance at 31 May 2023         286    286 
---------------------------  -----  ----- 
Carrying amounts 
At 1 June 2021                 277    277 
---------------------------  -----  ----- 
At 31 May 2022                 649    649 
---------------------------  -----  ----- 
At 31 May 2023                 602    602 
---------------------------  -----  ----- 
 
   ii.     Amounts recognised in profit or loss 
 
                                            2023     2022 
                                          US$000   US$000 
---------------------------------------  -------  ------- 
Interest on lease liabilities                 59       25 
Depreciation expense                         108      100 
Rent concessions received                   (18)      (2) 
Expenses relating to short-term leases        59       71 
---------------------------------------  -------  ------- 
 
   iii.    Amounts recognised in statement of cash flows 
 
                                              2023     2022 
                                            US$000   US$000 
-----------------------------------------  -------  ------- 
Payment of lease liabilities - principal      (89)     (92) 
Payment of lease liabilities - interest       (59)     (25) 
Rent concessions received                       18        2 
-----------------------------------------  -------  ------- 
 

20 Related party transactions

Identity of related parties

The Parent Company has a related party relationship with its subsidiaries (see note 10), and with its Directors and executive officers and with Burnbrae Ltd (significant shareholder).

Transactions and balances with and between subsidiaries

Transactions with and between the subsidiaries in the Group, which have been eliminated on consolidation, are considered to be related party transactions. During the year, Webis Holdings plc recharged head office costs to WatchandWager.com Ltd of US$ 238,104 (2022: US$ 248,340) and to WatchandWager.com LLC of US$ 357,156 (2022: US$ 372,511). WatchandWager.com LLC recharged support costs of US$ 8,120 (2022: US$ 9,644) to WatchandWager.com Ltd. At the year end, Webis Holdings plc had receivable balances with WatchandWager.com Ltd of US$ 168,575 (2022: US$ 224,074) and with WatchandWager.com LLC of US$ 511,166 (2022: US$ 532,548). WatchandWager.com Ltd had a receivable balance of US$ 7,656,283 (2022: US$ 7,608,501) with WatchandWager.com LLC. There were no impairments on these balances.

Transactions and balances with entities with significant influence over the Group

Rental and service charges of US$ 41,617 (2022: US$ 46,914) and Directors' fees of US$ 38,681 (2022: US$ 27,193) were charged in the year by Burnbrae Limited, of which Denham Eke is a common Director and Katie Errock an employee. Trade payables at the year-end of US$ 3,580 (2022: US$ 3,752) related to rental and service charges. The Group also had loans of US$ 1,350,000 (2022: US$ 1,350,000) from Galloway Limited, a company related to Burnbrae Limited by common ownership and Directors (note 16). Interest expense of US$ 99,498 (2022: US$ 97,293) was paid on this loan.

Transactions with key management personnel

The total amounts for Directors' remuneration were as follows:

 
                                                            2023     2022 
                                                          US$000   US$000 
-----------  ------------------------------------------  -------  ------- 
Emoluments   - salaries, bonuses, and taxable benefits       368      345 
 - fees                                                      105       96 
 ------------------------------------------------------  -------  ------- 
                                                             473      441 
 ------------------------------------------------------  -------  ------- 
 

Directors' Emoluments

 
                          Basic                        Termination                   2023      2022 
                         salary       Fees     Bonus      payments     Benefits     Total     Total 
                         US$000     US$000    US$000        US$000       US$000    US$000    US$000 
---------------------  --------  ---------  --------  ------------  -----------  --------  -------- 
Executive 
Ed Comins                   341          -         -             -           27       368       345 
Non-executive 
Denham Eke*                   -         24         -             -            -        24        27 
Sir James Mellon              -         18         -             -            -        18        21 
Richard Roberts               -         48         -             -            -        48        48 
Katie Errock*                 -         15         -             -            -        15         - 
---------------------  --------  ---------  --------  ------------  -----------  --------  -------- 
Aggregate emoluments        341        105         -             -           27       473       441 
---------------------  --------  ---------  --------  ------------  -----------  --------  -------- 
 

* Paid to Burnbrae Limited.

14,000,000 share options were issued to Ed Comins (see note 17) during 2016.

21 Financial risk management

Capital structure

The Group's capital structure is as follows:

 
                                   2023     2022 
                                 US$000   US$000 
------------------------------  -------  ------- 
Cash and cash equivalents         2,148    3,062 
Loans and similar liabilities   (1,397)  (1,417) 
------------------------------  -------  ------- 
Net funds                           751    1,645 
Shareholders' equity              (573)  (1,318) 
------------------------------  -------  ------- 
Capital employed                    178      327 
------------------------------  -------  ------- 
 

The Group's policy is to maintain as strong a capital base as possible, insofar as can be sustained due to the fluctuations in the net results of the Group and the inherent effect this has on the capital structure. The Group monitors costs on an ongoing basis and undertakes actions to grow revenue, with the aim of improving the Group's capital base. The Group does not have any external capital requirements imposed upon it.

The Group's principal financial instruments comprise cash and cash equivalents, trade receivables and payables that arise directly from its operations.

The main purpose of these financial instruments is to finance the Group's operations. The existence of the financial instruments exposes the Group to a number of financial risks, which are described in more detail below.

The principal risks which the Group is exposed to relate to liquidity risks, credit risks and foreign exchange risks.

Liquidity risk

Liquidity risk is the risk that the Group will be unable to meet its financial obligations as they fall due.

The Group's objective is to maintain continuity of funding through trading and share issues but to also retain flexibility through the use of short-term loans if required.

Management controls and monitors the Group's cash flow on a regular basis, including forecasting future cash flow. Banking facilities are kept under review to ensure they meet the Group's requirements. Funds equivalent to customer balances are held in designated bank accounts where applicable to ensure that Isle of Man Gambling Supervision Commission player protection principles are met. Other customer balances are covered by cash funds held within the Group and by receivables due from ADW racetrack settlement partners. The Directors anticipate that the business will maintain sufficient cash flow in the forthcoming period, to meet its immediate financial obligations.

The following are the contractual maturities of financial assets and financial liabilities:

2023

Financial assets

 
                             Carrying  Contractual  6 months    Up to      1-5       5+ 
                               amount    cash flow   or less   1 year    years    years 
                               US$000       US$000    US$000   US$000   US$000   US$000 
---------------------------  --------  -----------  --------  -------  -------  ------- 
Cash, cash equivalents and 
 restricted cash                3,285        3,285     3,285        -        -        - 
Trade receivables                 612          612       612        -        -        - 
Other receivables                 645          645       645        -        -        - 
Bonds and deposits                983          983       683      200        -      100 
---------------------------  --------  -----------  --------  -------  -------  ------- 
                                5,525        5,525     5,225      200        -      100 
---------------------------  --------  -----------  --------  -------  -------  ------- 
 

2022

Financial assets

 
                         Carrying  Contractual  6 months    Up to      1-5       5+ 
                           amount    cash flow   or less   1 year    years    years 
                           US$000       US$000    US$000   US$000   US$000   US$000 
-----------------------  --------  -----------  --------  -------  -------  ------- 
Cash, cash equivalents 
 and restricted cash        4,139        4,139     4,139        -        -        - 
Trade receivables             395          395       395        -        -        - 
Other receivables             668          668       668        -        -        - 
Bonds and deposits            983          983       681      202        -      100 
-----------------------  --------  -----------  --------  -------  -------  ------- 
                            6,185        6,185     5,883      202        -      100 
-----------------------  --------  -----------  --------  -------  -------  ------- 
 

2023

Financial liabilities

 
                           Carrying  Contractual  6 months    Up to      1-5       5+ 
                             amount    cash flow   or less   1 year    years    years 
                             US$000       US$000    US$000   US$000   US$000   US$000 
-------------------------  --------  -----------  --------  -------  -------  ------- 
Trade payables                (436)        (436)     (436)        -        -        - 
Amounts due to customers    (2,089)      (2,089)   (2,089)        -        -        - 
Other payables and loans    (2,153)      (2,372)     (815)    (406)  (1,151)        - 
Lease liabilities             (644)        (872)      (27)    (122)    (493)    (230) 
-------------------------  --------  -----------  --------  -------  -------  ------- 
                            (5,322)      (5,769)   (3,367)    (528)  (1,644)    (230) 
-------------------------  --------  -----------  --------  -------  -------  ------- 
 

2022

Financial liabilities

 
                           Carrying  Contractual  6 months    Up to      1-5       5+ 
                             amount    cash flow   or less   1 year    years    years 
                             US$000       US$000    US$000   US$000   US$000   US$000 
-------------------------  --------  -----------  --------  -------  -------  ------- 
Trade payables                (659)        (659)     (659)        -        -        - 
Amounts due to customers    (2,037)      (2,037)   (2,037)        -        -        - 
Other payables and loans    (1,899)      (2,214)     (541)     (58)  (1,615)        - 
Lease liabilities             (673)        (952)      (26)    (121)    (460)    (345) 
-------------------------  --------  -----------  --------  -------  -------  ------- 
                            (5,268)      (5,862)   (3,263)    (179)  (2,075)    (345) 
-------------------------  --------  -----------  --------  -------  -------  ------- 
 

Credit risk

Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Impairment losses on financial assets recognised in profit or loss were as follows:

 
                                           2023     2022 
                                         US$000   US$000 
--------------------------------------  -------  ------- 
Non-credit impaired trade receivables         7        5 
Credit impaired trade receivables            62       62 
Total impairment losses                      69       67 
--------------------------------------  -------  ------- 
 

The Group's exposure to credit risk is influenced by the characteristics of the individual racetracks and the settling agents operating on behalf of these tracks. The racetracks themselves are influenced by many factors, including the product they offer, supporting sources of revenue they might generate, such as offering simulcast, slots or sports wagering facilities, current economic conditions, ownership structure, state laws and so on, all of which may affect their liquidity and ability to operate.

The Group limits its exposure to credit risk by regular settling and verification of balances due to and from settling agents, with standard terms of one month. While there is on occasion debt that is slower to be settled, historical settlements for at least the last six years show that of the current trade receivable balance, greater than 99% would be expected to be received.

In addition, the majority of the current Group customers have transacted with the Group for five years or more and none of these customers balances have been specifically impaired in that period.

The Group has continued to take a conservative approach to the assessment of the Weighted Average Loss Rate and maintained rates that are considered to reflect the risk that exists under current market conditions. The previous two years Weighted Average Loss Rate was reflective of the uncertainty caused by the COVID-19 pandemic and therefore the current year rates are adjusted due to a reduction in this associated risk.

The following table provides information about exposure to credit risk and expected credit losses for trade receivables as at 31 May 2023:

 
    2023                          Weighted      Gross Carrying                            N et Carrying         Credit 
                                   Average       Amount US$000        Loss Allowance             Amount       Impaired 
                                 Loss Rate                                    US$000             US$000 
                                       (%) 
--------------------------  --------------  ------------------  --------------------  -----------------  ------------- 
    Current (not past due)           0.50%                 421                   (2)                419             No 
    1-30 days past due               1.00%                 110                   (1)                109             No 
    31-60 days past due              3.00%                  70                   (2)                 68             No 
    61-90 days past due              5.00%                   6                   (1)                  5             No 
    More than 90 days past 
     due                             7.00%                  12                   (1)                 11             No 
    More than 90 days past 
     due                           100.00%                  62                  (62)                  -            Yes 
--------------------------  --------------  ------------------  --------------------  -----------------  ------------- 
                                                           681                  (69)                612 
--------------------------  --------------  ------------------  --------------------  -----------------  ------------- 
 
 
    2022                    Weighted      Gross Carrying                            N et Carrying      Credit Impaired 
                             Average       Amount US$000        Loss Allowance             Amount 
                           Loss Rate                                    US$000             US$000 
                                 (%) 
--------------------  --------------  ------------------  --------------------  -----------------  ------------------- 
    Current (not 
     past due)                 1.00%                3 74                   (4)                370                   No 
    1-30 days past 
     due                       2.00%                   9                   (0)                  9                   No 
    31-60 days past 
     due                       5.00%                 1 6                   (1)                 15                   No 
    61-90 days past 
     due                       7.00%                ( 1)                   (0)                (1)                   No 
    More than 90 
     days past 
     due                      10.00%                   2                   (0)                  2                   No 
    More than 90 
     days past 
     due                     100.00%                  62                  (62)                  -                  Yes 
--------------------  --------------  ------------------  --------------------  -----------------  ------------------- 
                                                    4 62                  (67)                395 
--------------------  --------------  ------------------  --------------------  -----------------  ------------------- 
 

The Group uses an allowance matrix to measure the ECLs of trade receivables from racetracks and their settling agents, which comprise a moderate number of balances, ranging from small to large. The Group has reviewed its historical losses over the past four years as well as considering current economic conditions in estimating the loss rates and calculating the corresponding loss allowance.

Classes of financial assets - carrying amounts

 
                                 2023     2022 
                               US$000   US$000 
----------------------------  -------  ------- 
Cash and cash equivalents       2,148    3,062 
Bonds and deposits                983      983 
Trade and other receivables     1,258    1,063 
----------------------------  -------  ------- 
                                4,389    5,108 
----------------------------  -------  ------- 
 

Generally, the maximum credit risk exposure of financial assets is the carrying amount of the financial assets as shown on the face of the Statements of Financial Position (or in the notes to the financial statements). Credit risk, therefore, is only disclosed in circumstances where the maximum potential loss differs significantly from the financial asset's carrying amount.

The maximum exposure to credit risks for receivables in any business segment:

 
                 2023     2022 
               US$000   US$000 
------------  -------  ------- 
Pari-mutuel     1,258    1,063 
------------  -------  ------- 
 

Of the above receivables, US$ 612,000 (2022: US$ 395,000) relates to amounts owed from racing tracks. These receivables are actively monitored to avoid significant concentration of credit risk and the Directors consider there to be no significant concentration of credit risk.

The Directors consider that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality. The banks have external credit ratings of at least Baa3 from Moody's.

The credit risk for liquid funds and other short-term financial assets is considered negligible since the counterparties are reputable banks with high-quality external credit ratings.

Interest rate risk

The Group finances its operations mainly through capital with limited levels of borrowings. Cash at bank and in hand earns negligible interest at floating rates, based principally on short-term interbank rates.

Any movement in interest rates would not be considered to have any significant impact on net assets at the balance sheet date as the Group and Parent Company do not have floating rate loans payable.

Foreign currency risks

The Group operates internationally and is subject to transactional foreign currency exposures, primarily with respect to Pounds Sterling, Hong Kong Dollars, and Euros.

The Group does not actively manage the exposures but regularly monitors the Group's currency position and exchange rate movements and makes decisions as appropriate.

At the reporting date the Group had the following exposure:

 
                                 USD       GBP       EUR       HKD    Total 
2023                          US$000    US$000    US$000    US$000   US$000 
-----------------------  -----------  --------  --------  --------  ------- 
Current assets                 4,703       114        86       523    5,426 
Current liabilities          (3,146)     (334)      (43)     (633)  (4,156) 
-----------------------  -----------  --------  --------  --------  ------- 
Short-term exposure            1,557     (220)        43     (110)    1,270 
-----------------------  -----------  --------  --------  --------  ------- 
 
 
 
                          USD      GBP      EUR      HKD    Total 
2022                   US$000   US$000   US$000   US$000   US$000 
--------------------  -------  -------  -------  -------  ------- 
Current assets          5,197      236       85      568    6,086 
Current liabilities   (2,705)    (317)     (69)    (642)  (3,733) 
--------------------  -------  -------  -------  -------  ------- 
Short-term exposure     2,492     (81)       16     (74)    2,353 
--------------------  -------  -------  -------  -------  ------- 
 

The following table illustrates the sensitivity of the net result for the year and equity with regards to the Group's financial assets and financial liabilities and the US Dollar-Sterling exchange rate, US Dollar-Euro exchange rate and US Dollar-Hong Kong Dollar exchange rate.

A 5% weakening of the US Dollar against the following currencies at 31 May 2023 would have increased / (decreased) equity and profit and loss by the amounts shown below:

 
                          GBP      EUR      HKD    Total 
2023                   US$000   US$000   US$000   US$000 
--------------------  -------  -------  -------  ------- 
Current assets              6        4       26       36 
Current liabilities      (17)      (2)     (32)     (51) 
--------------------  -------  -------  -------  ------- 
Net assets               (11)        2      (6)     (15) 
--------------------  -------  -------  -------  ------- 
 
 
                          GBP      EUR      HKD    Total 
2022                   US$000   US$000   US$000   US$000 
--------------------  -------  -------  -------  ------- 
Current assets             12        4       28       44 
Current liabilities      (16)      (3)     (32)     (51) 
--------------------  -------  -------  -------  ------- 
Net assets                (4)        1      (4)      (7) 
--------------------  -------  -------  -------  ------- 
 

A 5% strengthening of the US Dollar against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above on the basis that all other variables remain constant.

22 Controlling party and ultimate controlling party

The Directors consider the ultimate controlling party to be Burnbrae Limited and its beneficial owner Jim Mellon by virtue of their combined shareholding of 63.10%.

23 Subsequent events

In September 2023, the Group has agreed funding of GBP 1,150,000 from Galloway Limited (related entity), in the form of convertible loan notes, which will enable the Group to further invest in its business-to-consumer sector. The loan will accrue interest at the rate of 11% per annum and is convertible into shares under specific circumstances. The convertible loan notes comprise GBP 750,000 in respect of new funding and an existing debt of GBP 400,000, after conversion of US$ 500,000 due and outstanding by the Group to Galloway Limited (see note 16).

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November 30, 2023 07:00 ET (12:00 GMT)

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